Institutional development, state ownership, and corporate cash holdings: evidence from China

Kusnadi, Yuanto, Yang, Zhifeng and Zhou, Yuxiao 2015, Institutional development, state ownership, and corporate cash holdings: evidence from China, Journal of business research, vol. 68, no. 2, pp. 351-359, doi: 10.1016/j.jbusres.2014.06.023.

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Title Institutional development, state ownership, and corporate cash holdings: evidence from China
Author(s) Kusnadi, Yuanto
Yang, ZhifengORCID iD for Yang, Zhifeng
Zhou, Yuxiao
Journal name Journal of business research
Volume number 68
Issue number 2
Start page 351
End page 359
Total pages 9
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2015-02
ISSN 0148-2963
Summary This study examines how institutional development and state ownership influence corporate cash holdings among Chinese firms. The empirical results reveal that firms in provinces with more developed institutions (non-state-controlled firms) hold more (less) cash reserves than those in provinces with less developed institutions (state-controlled firms). Moreover, the positive effect between institutional development and cash holdings is more prominent for non-state-controlled firms. These findings are consistent with the hypothesis that more developed institutions mitigate the threat of political extraction for non-state-controlled firms, resulting in larger cash holdings among these firms. Subsequent analyses demonstrate that the impact of institutional development on cash holdings is weakened for non-state-controlled firms which have established political connections. Therefore, this study identifies one vital channel through which political connections are beneficial for non-state-controlled firms in terms of mitigating the threat of political extraction.
Language eng
DOI 10.1016/j.jbusres.2014.06.023
Field of Research 150104 International Accounting
Socio Economic Objective 910499 Management and Productivity not elsewhere classified
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2014, Elsevier Inc.
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Document type: Journal Article
Collections: Faculty of Business and Law
Department of Accounting
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